The Bureau of Labor Statistics (BLS) reported that there were 143,000 jobs created in January, which was weaker than estimates of 170,000. The previous two months were revised higher by 100,000 jobs, however, which added some strength to the report.

The media made a big deal about average hourly earnings, which rose 0.5% in January. This likely caused Bonds to sell off. It is thought that when earnings rise, individuals will spend more, which can be inflationary. Looking deeper, however, shows that hours worked fell from an initially reported number in December of 34.3 hours to 34.1 in January. And what really matters is take home pay. Average weekly earnings only rose by 0.2% and are up 3.8% year over year…not blistering figures. Additionally, the drop in hours is another way companies can cut costs without letting people go. If you were to extrapolate how many jobs the 0.2 drop in hours accounts for based on output in the economy, it would be a drop of almost 1 million jobs.

There are two surveys within the Jobs report, the Business Survey and the Household Survey. The Business Survey is where the headline job creation number comes from, and the Household Survey is where the unemployment rate comes from.

The Household Survey is clouded by new census data, where they added over 2 million people to the labor force from immigration, and a larger number were counted as employed.

The Household Survey showed that there were 2.234M jobs created because they added all of the new findings into the month of January - but there were not that many actual jobs created in the month. The labor force increased by 2.197M, but because there were more jobs created than the rise in the labor force, the unemployment rate fell from 4.1% to 4%. This also applied some pressure to the Bond market, but the reliability of the number is questionable because of the new census estimates.

The BLS data only covers 27% of the jobs and the response rate is very low. If a firm goes out of business, the staff are not going to respond. It’s also highly likely that larger businesses are more likely to respond, while other businesses may think they have better things to do than answer BLS surveys. Businesses that are doing well are also more likely to answer versus those that are struggling or understaffed. As a result, there is a high probability that there is an upward skew, which does not get sorted out until the QCEW data comes much later. We think that there will be some revisions to this data eventually, which will help the Bond market. Individuals that are undocumented are also not likely to respond, if the BLS even has a way of knowing they are here or a way to contact them.

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